Oil stays below $40 after OPEC decides against output cut

Oil stayed below $40 a barrel in Asia on Monday after the Organisation of Petrol Experting Countries (OPEC) cartel decided against slashing high output levels and traders turned their attention on a US central bank meeting next week.

The logo of the Organisation of Petrol Exporting Countries (OPEC).(OPEC website)

Oil stayed below $40 a barrel in Asia on Monday after the Organisation of Petrol Exporting Countries (OPEC) cartel decided against slashing high output levels and traders turned their attention on a US central bank meeting next week.

US benchmark West Texas Intermediate for delivery in January was down 33 cents at $39.64 and Brent crude for January was trading 22 cents lower at $42.78 a barrel at around 0655 GMT. At a meeting in Vienna on Friday, OPEC decided against cutting output to raise prices.

OPEC, whose members together pump out more than one third of world oil, is currently producing above its official target of 30 million barrels per day despite a global crude supply glut that has battered prices for more than a year.

“Crude oil prices were no doubt compressed by the lack of an agreement at the OPEC, signalling that the supply glut will persist longer,” said Bernard Aw, market strategist at IG Markets in Singapore.

“WTI is trading below the key $40 (mark) and it looks set to remain there.”

Sanjeev Gupta, who heads the Asia-Pacific oil and gas practice at professional services firm EY, said market attention had now turned to an upcoming meeting of Federal Reserve policymakers and to the latest economic data from China, the world’s top energy consumer.

Traders are watching whether the Fed will raise interest rates this month, a move that will boost the dollar. A stronger US currency will make dollar-priced oil more expensive to holders of weaker currencies, denting demand and prices.

“While all eyes are now on the Federal Reserve as it meets next week for the last policy meeting this year to decide whether to raise its benchmark rate, economic data from China will set the tone of prices in the coming weeks,” Gupta said.

He said the dollar also got a boost from a strong US jobs report on Friday. The report strengthens the case for a Fed rate rise, analysts said.